Advanced Micro Devices, Inc.

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Bullish +75

Is AMD or Broadcom the Best AI Chip Stock After Nvidia?

🤖 Nvidia currently dominates the AI chip market, but the sector is projected to reach $333 billion by the end of the decade.

💻 AMD competes directly with Nvidia in general-purpose AI chips and saw data center revenue grow 57% year-over-year to $5.8 billion in Q1 2026.

🤝 AMD has secured a deal to supply Meta Platforms with 6 gigawatts of Instinct GPUs, though reliance on Nvidia's CUDA software limits its threat level.

🔧 Broadcom takes a different approach by co-designing custom XPU chips for specific customer AI workloads rather than selling general-purpose hardware.

📈 Broadcom has established partnerships with major AI players including Anthropic, Alphabet, Meta Platforms, and OpenAI.

💰 Broadcom generated $10.8 billion in AI revenue during the second quarter, contributing to a long-term expectation of $100 billion in annual sales by fiscal 2027.

📉 The stock recently faced a sell-off after third-quarter AI revenue guidance came in below expectations, though CEO Hock Tan reaffirmed long-term targets.

💵 Broadcom's stock is priced at a premium compared to AMD, but the article argues this valuation gap is justified by its competitive position and growth potential.

📊 Analysts anticipate faster growth for Broadcom relative to AMD, suggesting the current dip may present a buying opportunity.

🏆 The article concludes that Broadcom is likely the superior AI chip stock to own due to its custom silicon strategy and high-profile customer relationships.

📉 The Motley Fool Stock Advisor team recently released a list of 10 preferred stocks that did not include Broadcom.

📈 Historical examples show that Stock Advisor recommendations have generated significant returns, such as Netflix in 2004 and Nvidia in 2005.

👥 Justin Pope holds positions in Alphabet and Meta Platforms, while The Motley Fool maintains positions in AMD, Broadcom, and Nvidia.

Bullish Signals
  • AMD's data center revenue grew by 57% year over year to $5.8 billion in the first quarter of 2026.
  • AMD recently announced plans to supply Meta Platforms with 6 gigawatts of its Instinct GPUs, including a custom version for the first gigawatt.
  • Broadcom generated $10.8 billion in AI revenue in the second quarter, indicating significant growth ahead as custom silicon projects roll out.
  • Broadcom's CEO Hock Tan reiterated the company's long-term expectation of $100 billion in annual AI chip sales starting in fiscal year 2027.
  • Broadcom is co-designing custom chips for high-profile customers including Anthropic, Alphabet, Meta Platforms, and OpenAI on its XPU chips.
  • The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Meta Platforms, and Nvidia.
Risk Factors
  • AMD is unlikely to threaten Nvidia's market dominance because customers like Meta have already heavily relied on Nvidia's CUDA software.
  • Broadcom's Q3 AI revenue guidance missed expectations, causing a stock sell-off.
Full Analysis
The article argues that Broadcom (NASDAQ: AVGO) is the superior AI chip investment compared to AMD, despite AMD's recent growth in data center revenue which rose 57% year over year to $5.8 billion in Q1 2026. While AMD competes directly with Nvidia on general-purpose chips and has secured a deal to supply Meta Platforms with 6 gigawatts of Instinct GPUs, the text suggests it cannot easily displace Nvidia due to customer reliance on CUDA software. Broadcom is highlighted as the winner because of its custom silicon strategy, specifically its XPU chips which involve co-designing hardware for specific customer workloads like those from Anthropic, Alphabet, Meta Platforms, and OpenAI. This approach builds stickier relationships and improves efficiency as the market shifts toward inference. Although Broadcom's Q3 AI revenue guidance missed expectations causing a stock sell-off, CEO Hock Tan reaffirmed a long-term target of $100 billion in annual AI chip sales starting in fiscal year 2027, having already generated $10.8 billion in AI revenue for the second quarter. The author concludes that Broadcom's premium valuation is justified by its high-profile customer list and growth trajectory, noting that analysts see faster growth ahead for Broadcom than AMD. The piece also references a Motley Fool Stock Advisor report which did not include Broadcom in its top 10 stocks but uses historical examples of Netflix and Nvidia to illustrate potential returns from their recommendations.